Year in Review: This year’s best-read Editor’s Logs

From a repair industry analyst’s standpoint, the last few days have been among the most dramatic ever witnessed.

In Canada, the Fix Network absorbed Uni-Select’s Carrossier ProColor network, stealing it away from its long-standing association with CSN. In the U.S., CARSTAR-owner Driven Brands announced that it had absorbed the ABRA rump–the 50-or-so US ABRA locations not picked up by Calibre Collision last year. Down under, auto insurer Suncorp sold almost all of its stake in Capital SMART, Australia’s second-largest collision chain, to an auto parts manufacturing company.

In short, consolidation has gone crazy. While it has taken many by surprise, industry analyst Brad Mewes actually predicted that consolidation was about to go haywire.

During his presentation at the 2018 IBIS summit, industry analyst Brad Mewes argued that the major players in the North American collision repair market would soon be going to redirect efforts away from swallowing up individual shops, and towards business streamlining and ‘mega buyouts’ of other big players.

His argument leaned heavily on a well-regarded economic theory called the consolidation curve in his argument that consolidation in the North American sector was undergoing a fundamental—and inevitable—transition. As Mewes puts it, “Industries evolve in a very predictable way over time.” In brief, the basic idea of the consolidation curve is that consolidation strikes in four phases—opening, growth, focus and balance.

In the opening stage, early entrants into an industry protect their ‘first mover’ advantage by aggressively pursuing growth. In the second stage, growth, major players begin to turn their size advantage towards swallowing smaller competitors en masse. In the tertiary period, established industry behemoths focus on streamlining businesses and merging with other ‘great powers’. In the final stage, balancing, the near-total market dominance of a few businesses discourages them from pursuing growth-oriented strategies and encourages making non-aggression pacts with their peers.

In making his case, Mewes pointed to changes in North America’s largest franchises growth rates–pointing to Fix and CARSTAR as prime examples of businesses in the growth phase of the consolidation cycle. 

At the time, both businesses were growing at astounding rates–and primarily focused on winning over single-business operations into their networks. Since then, CARSTAR’s strategy, at least, has been to focus on converting MSOs–something Mewes also suggested would be a harbinger of the transition to the next stage of consolidation, the focus stage.

It seems Mewes was right–but there was more to his prediction than that the industry behemoths would start making breakfast out of one another. He also suggested there would be a major change in the way the businesses themselves were managed.

According to Mewes, once the focus phase began in earnest, the big players will soon start shedding the less profitable sides of their business, with the profits filling the war-chests required to complete massive buyouts. 

So what does this mean for the average franchise member–or even their independent competitor? 

It means that efficiency is the call of the hour.

By Gideon Scanlon

As editor of Collision Repair, pointing out the fact that the collision industry is changing at breakneck speed is something of a daily ritual. While I consider the truth of that notion to be self-evident, I do feel that the sentiment ignores the fact that other areas of the aftermarket are likely to face far more significant transformations in the future. Chief among these malleable aftermarket sectors are the insurers.

In ten years, it is a fairly safe bet that whatever changes to hit the collision industry, people will still travel, and the things they travel around in will still need the occasional repair. But what will become of the auto insurance industry in a decade? I’m not at all sure. More importantly, I’m very skeptical of anyone who thinks they are!

What is clear that, in most provinces, high auto insurance premiums have become a galvanizing political issue. In Ontario and Alberta, discontent with rates has played some role in the collapse of left-wing provincial governments. In both provinces, their right-winged successors have pursued major policy initiatives that aim to open the market up to increased competition–moves which have been met with general approval. Should the initiatives prove successful, similar policies will likely be implemented by the other provinces as well.

The companies that do succeed in an increasingly competitive environment will, of course, be the ones that adopt new strategies allowing them to radically undercut other insurers on the price front. Many insurers seem to believe that a killer app could secure their financial futures. Mobile technology can, after all, allow insurers to set individualized rates–favouring drivers who do not speed, text or sleep behind the wheel.

Of course, it isn’t just a push for increases in market competition that will play a role in reshaping auto insurers. While it is unclear what percentage of cars in the future will be driven by people, it is equally uncertain how autonomous vehicles will impact the number of car accidents on the roads–or, for that matter, the price of repairs.

OEMs, it seems, are banking on a different trend taking root–the end of the individual car-owner. In an age where OEMs operate fleets, leasing them out to customers on a short term basis, who would even be responsible for the vehicle’s insurance? It isn’t just the fleet-oriented OEMs like Toyota and Volvo that are considering the idea of absorbing the responsibilities of insurers. Tesla, a company banking on continued personal car ownership, has already announced its own plan to provide insurance for its own product.

I can see three very different, but convincing scenarios, which I’ve outlined below. Brighter minds may be able to come up with far more–and I’d love to hear about them. 

A: It is 2029. Traditional auto insurers have been priced out of the market by mobile apps that allow speculators to invest their own money by underwriting individual drivers. With information on the driving habits of individual drivers available to a seemingly limitless number of small-time investors, it is a buyers market. Premium rates drop precipitously and the businesses that stick to the old model crumble to dust. Sure, Amazon’s auto insurance department underwrites the whole system and provides the infrastructure to keep it running, but they do that with everything these days.

B: It is 2029. The frequency of auto accidents has been cut by 90 percent thanks to the widespread adoption of self-driving automobiles. When they do crash, however, they are costly to fix–and write-offs are far more frequent. For those auto insurers who stuck it out through the lean years of the 2010s, business is steady and more predictable than ever before. Whatever happened to the many smaller-scale start-ups promising to shake-up the industry with mobile-based grading systems related to driver performance, who can remember?

C: It is 2029. After legal precedents continued to establish that insurers had to cover increasingly expensive OEM repair procedures, the insurance market essentially collapsed. OEMs have largely absorbed the duties once performed by auto insurers. With personal vehicles now only a small minority of the auto market, OEMs invest considerable resources into making their–largely self-driving–fleets better at avoiding collisions. 

Look, my point isn’t that the collision industry isn’t going through a radical transformation, just that the day-to-day changes facing repair businesses pale next to those of insurers. In covering the fast-paced world of collision repair, it is easy to forget about its position in the broader auto aftermarket–and, indeed, in the global economy.

By Gideon Scanlon

I’d intended to write this weeks column on the many collision repair facilities that were celebrating the Toronto Raptors efforts to dribble, dunk and alley-oop  their way to the top of the National Basketball Association, but that doesn’t quite feel right. Canada’s collision community lost one of its own this week—CIIA founder John Norris.

While Collision Repair ran an obituary on Wednesday, I thought I would take the opportunity to thank John for his long service to the industry, and the sage counsel he offered to me personally. I didn’t know John well, we had spoken on a number of occasions, and he had taken quite a bit of time to help me come to grips with the ins-and-outs of collision repair during my early days covering the industry. 

For those who didn’t get the chance to meet him, John was a big believer in the industry–and in fairness. In recent years, he made it his mission to ensure that the aftermarket’s right to repair vehicles were not impacted by efforts to lock out access vehicle service information. In fact, it seems fair to say he was that cause’s greatest champion. 

On a personal level, I am particularly grateful for his gracious offer to review one of my earliest submissions to this magazine, which was on the number of new apprentices entering the industry. Quickly realizing that I had relied on a dubious source for my information, he emailed me before I submitted the inaccurate report. Rather than leaving it there, John followed-up with a list of far more reliable statistics, and a phone call to clarify the issue with the original report.

I wasn’t the only young person in the industry John was prepared to extend a helping hand to. He was similarly generous with his time with several of my current and former colleagues at Collision Repair and Bodyworx Professional, regularly providing many of them with feedback about our work.  He was also an ardent defender of the collision industry’s apprentices. In fact, John was returning home from the Skills Canada National Competition in Halifax when he died.

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By Gideon Scanlon

By Gideon Scanlon

Toronto, Ontario — March 1, 2019 — Though we may point out any number of differences between our culture and that of our neighbour, Canadians usually accept that our culture is very similar to America’s. We eat the same food, we drive the same vehicles, we watch the same television shows–and many of us get our vehicles repaired at the same banner franchises. Within the collision repair industry, however, it has always seemed to me that these differences run far deeper.

In Canada, industry meetings are far more likely to cover convincing insurers to pay for the costs of making modern, technically involved repairs, while with In the United States, the industry’s discussions often revolve more around questions of liability.

Until last week, I suspected this distinction had more to do with the fact that the legal ramifications of the John Eagle decision on repairers remained unclear. Now, however, I think there might be more to it. In fact, I am starting to suspect that it isn’t the repairers who are all that different from one another–it is the auto insurers.

Late last month, I travelled down to Texas, to visit the headquarters of a major remote diagnostic scanning company. Like any self-respecting collision industry reporter, I’d been fascinated by the company’s in depth approach to scanning, and eager to find out as much as I could about its plans for the future. 

With a number of other true northerners in key positions and a loyal customer base up here to boot, I was surprised to learn that the company viewed the Canadian market as one they were still establishing themselves in. One of the reasons that was highlighted was the fact that Canadian auto insurers were more likely to view a remote diagnostic scan as a luxury than their American counterparts. Where Canadian insurers see luxury, however, American ones are more likely to see increased transparency.

It isn’t just this company, with its game-changing and oft misunderstood technology, that feels our insurance companies have different priorities to their American peers. In the days since, I’ve spoken with other companies in different areas of the market, and heard a few stories about how Canadian insurers are slow to accept new approaches–even if they offer the opportunity for savings. 

With this cultural divide in mind, it only makes sense that Canada’s collision community is, well, somewhat obsessed with finding ways to convince insurers to cover even technologically necessary procedures–after all we do repair the same vehicles!

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